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It looks like JK Paper Limited (NSE:JKPAPER) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 13th of August will not receive the dividend, which will be paid on the 22nd of September.
JK Paper's upcoming dividend is ₹3.50 a share, following on from the last 12 months, when the company distributed a total of ₹3.50 per share to shareholders. Looking at the last 12 months of distributions, JK Paper has a trailing yield of approximately 3.2% on its current stock price of ₹109.1. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for JK Paper
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. JK Paper is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (54%) of its free cash flow in the past year, which is within an average range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see JK Paper's earnings have been skyrocketing, up 55% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, JK Paper has lifted its dividend by approximately 7.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.